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Does the Decoupling Reform Affect Agricultural Employment in Sweden? Evidence from an Exogenous Change

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This study uses aggregated municipality data, for the years 2001 to 2009, to explore whether direct payments to farmers affect agricultural employment in Swedish municipalities. The decoupling reform in 2005 included a new grassland support payment accompanied by management obligations that had unexpectedly high redistributive consequences as it greatly increased CAP payments to municipalities with large areas of grassland. In some municipalities, total payments more than doubled. Thus, since the reform seems exogenous to the behavior of farmers and the regional economy, the reform can be used to identify a subsidy effect. We find that a permanent increase in agricultural employment can be attributed to the new grassland support. Our results indicate that the grassland support generates an additional job at a cost of SEK 250,000, relative to the average agricultural wage of SEK 333,000. However, the subsidy effect is largely keeping jobs in agriculture, i.e. the grassland support may be slowing down the process of structural change in grassland regions.

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  • Nordin, Martin, 2013. "Does the Decoupling Reform Affect Agricultural Employment in Sweden? Evidence from an Exogenous Change," Working Papers 2013:40, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2013_040
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    2. Bartolini, Fabio & Brunori, Gianluca & Coli, Alessandra & Landi, Chiara & Pacini, Barbara, 2015. "Assessing the Causal Effect of Decoupled Payments on farm labour in Tuscany Using Propensity Score Methods," 2015 Conference, August 9-14, 2015, Milan, Italy 211200, International Association of Agricultural Economists.
    3. Amanda Sahrbacher & Jordan Hristov & Mark V. Brady, 2017. "A combined approach to assess the impacts of Ecological Focus Areas on regional structural development and agricultural land use," Review of Agricultural, Food and Environmental Studies, Springer, vol. 98(3), pages 111-144, December.
    4. Blomquist , Johan & Nordin, Martin, 2013. "Do the CAP Subsidies Increase Employment in Sweden? Estimating the Open Economy Relative Multiplier Using an Exogenous Change in the CAP," Working Papers 2013:41, Lund University, Department of Economics.
    5. Valentina Constanta Tudor & Toma Adrian Dinu & Marius Vladu & Dragoș Smedescu & Ionela Mituko Vlad & Eduard Alexandru Dumitru & Cristina Maria Sterie & Carmen Luiza Costuleanu, 2022. "Labour Implications on Agricultural Production in Romania," Sustainability, MDPI, vol. 14(14), pages 1-22, July.
    6. Blomquist, Johan & Nordin, Martin, 2017. "Do the CAP subsidies increase employment in Sweden? estimating the effects of government transfers using an exogenous change in the CAP," Regional Science and Urban Economics, Elsevier, vol. 63(C), pages 13-24.
    7. Chengyou Li & Zhouhao Sha & Xiaoqin Sun & Yong Jiao, 2022. "The Effectiveness Assessment of Agricultural Subsidy Policies on Food Security: Evidence from China’s Poverty-Stricken Villages," IJERPH, MDPI, vol. 19(21), pages 1-17, October.
    8. BOULANGER Pierre & PHILIPPIDIS George & URBAN Kirsten, 2017. "Assessing potential coupling factors of European decoupled payments with the Modular Agricultural GeNeral Equilibrium Tool (MAGNET)," JRC Research Reports JRC104276, Joint Research Centre.
    9. Loizou, Efstratios & Karelakis, Christos & Galanopoulos, Konstantinos & Mattas, Konstadinos, 2019. "The role of agriculture as a development tool for a regional economy," Agricultural Systems, Elsevier, vol. 173(C), pages 482-490.
    10. Cei, Leonardo & Stefani, Gianluca & Defrancesco, Edi, 2020. "The role of group-time treatment effect heterogeneity in long standing European agricultural policies. An application to the European geographical indication policy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 9(1), April.
    11. Zimmert, Franziska & Zorn, Alexander, 2021. "Direct payments and on-farm employment: evidence from a spatial regression discontinuity design," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317052, German Association of Agricultural Economists (GEWISOLA).
    12. Alan Matthews, 2017. "How Can the CAP Promote Rural Jobs?," EuroChoices, The Agricultural Economics Society, vol. 16(3), pages 18-21, December.

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    More about this item

    Keywords

    agriculture; subsidies; employment effect; single farm payment; Common Agricultural Policy; EU;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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